Yahoo (YHOO) beat analysts estimates for third quarter earnings Tuesday, but missed the mark on revenue expectations for the third consecutive time.
Yahoo continues to show weakness in its ability to grow its revenues, as well as forecast where its revenues are headed. That apparently doesn't sit well with investors. Yahoo shares fell 2.73% in after-hours trading to $15.49 a share.
During the quarter, Yahoo generated $1.6 billion in revenue, up 2% over last year. But excluding revenues from its affiliate sites, also known as traffic acquisition costs (TAC), Yahoo generated only $1.12 billion. Wall Street was expecting $1.13 billion, according to Thomson Reuters.
For Yahoo, that marks the third quarter in a row where it has posted declining revenues, excluding TAC, and missed analysts revenue estimates. Yahoo's revenues excluding TAC have fallen consecutively for six of the past seven quarters.
Yahoo said that during the quarter, its display advertising rose 17%, compared with last year. But search advertising revenue fell 7% in the quarter. Overall, its marketing services revenues rose to $877 million in the quarter, up 3% from the same period last year.
Bartz in the Spotlight
The combination of falling revenues, an under-performing stock and questions over Yahoo's vision have put its CEO Carol Bartz on the hot seat and raises questions whether she will last out the year. Some people familiar with the board's thinking have previously said she is running on borrowed time to steer the ship straight.
Once again, however, Bartz has displayed her ability to cut expenses. Yahoo reported net income of 29 cents a share, compared with 13 cents a year ago. But excluding a one-time gain of 13 cents a share from the sale of HotJobs, Yahoo reported a net profit of 16 cents a share. Analysts were expecting Yahoo to post a net profit of 15 cents a share, according to Thomson Reuters.
"We delivered a solid quarter with good display advertising revenue growth, big gains in operating income, and margins that were double what they were last year," said Bartz, in a statement. "Because we recognize the tremendous value of our assets, we also dramatically stepped up our stock repurchases. We've now bought back more than 7% of the company's stock this year alone."
Yahoo's fourth quarter revenue forecast is below Wall Street's. Yahoo says its revenues, excluding TAC, will be in the range of $1.13 billion to $1.23 billion. Analysts were expecting $1.26 billion, according to Thomson Reuters.
Yahoo Beats Earnings, but Misses Revenues Again